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The military exchanges operate retail stores similar to department stores in more than 1,500 locations worldwide. The exchanges stock merchandise from many sources, including name-brand companies, brokers and importers, and overseas firms. Reports of worker rights abuses, such as child labor and forced overtime, and antilabor practices have led human rights groups and the press to scrutinize working conditions in overseas factories. GAO found that the military exchanges are not as proactive as private sector companies in determining working conditions at the overseas factories that manufacture their private label merchandise. Moreover, the exchanges have not sought to verify that overseas factories comply with labor laws and regulations. A single industrywide standard for working conditions at overseas factories was not considered practical by the 10 retailers GAO contacted. However, these retailers have taken the following three steps to ensure that goods are not produced by child or forced labor: (1) developing workplace codes of conduct that reflect their expectations of suppliers; (2) disseminating information on fair and safe labor conditions and educating their employees, suppliers, and factory workers on them; and (3) using their own employees or contractors to regularly inspect factories to ensure that their codes of conduct are upheld.

Recommendations for Executive Action

Status: Closed - Implemented

Comments: In response to GAO's recommendation, DOD reissued DOD Instruction 4105.71 (Nonappropriated Fund Procurement Policies) dated July 30, 2002, requiring the military exchanges to establish ongoing communications with government agencies, retailers, and the International Labor Organization to help the exchanges stay abreast of information that would facilitate their implementation and monitoring efforts to assure that exchange merchandise is not produced by child or forced labor.

Recommendation: As the Secretary of Defense moves to implement the congressionally directed program to assure that private label exchange merchandise is not produced by child or forced labor, the Under Secretary of Defense (Personnel and Readiness), in conjunction with the Assistant Secretary of Defense (Force Management Policy), should require the Army and Air Force Exchange Service, Naval Exchange Service Command, and Marine Corp Community Services to develop their program around the framework outlined in this report, including establishing ongoing communications with these organizations to help the exchanges stay abreast of information that would facilitate their implementation and monitoring efforts to assure that exchange merchandise is not produced by child or forced labor.

Agency Affected: Department of Defense

Status: Closed - Implemented

Comments: In response to GAO's recommendation, DOD reissued DOD Instruction 4105.71 (Nonappropriated Fund Procurement Policies) dated July 30, 2002, requiring the military exchanges to use government agencies such as the Departments of State and Labor and the International Labor Organization as resources for information and insights that would facilitate structuring their program.

Recommendation: As the Secretary of Defense moves to implement the congressionally directed program to assure that private label exchange merchandise is not produced by child or forced labor, the Under Secretary of Defense (Personnel and Readiness), in conjunction with the Assistant Secretary of Defense (Force Management Policy), should require the Army and Air Force Exchange Service, Naval Exchange Service Command, and Marine Corp Community Services to develop their program around the framework outlined in this report, including using government agencies, such as the Departments of State and Labor, retailers, and the International Labor Organization as resources for information and insights that would facilitate structuring their program.

Recommendation: As the Secretary of Defense moves to implement the congressionally directed program to assure that private label exchange merchandise is not produced by child or forced labor, the Under Secretary of Defense (Personnel and Readiness), in conjunction with the Assistant Secretary of Defense (Force Management Policy), should require the Army and Air Force Exchange Service, Naval Exchange Service Command, and Marine Corp Community Services to develop their program around the framework outlined in this report, including developing a monitoring effort to ensure that the codes of conduct are upheld.

Agency Affected: Department of Defense

Status: Closed - Implemented

Comments: In response to GAO's recommendation, DOD reissued DOD Instruction 4105.71 (Nonappropriated Fund Procurement Policies) dated July 30, 2002, requiring the military exchanges to develop an implementation plan for the code of conduct that includes steps to communicate the elements of the code to internal staff business partners and factory workers, and to train them on these elements.

Recommendation: As the Secretary of Defense moves to implement the congressionally directed program to assure that private label exchange merchandise is not produced by child or forced labor, the Under Secretary of Defense (Personnel and Readiness), in conjunction with the Assistant Secretary of Defense (Force Management Policy), should require the Army and Air Force Exchange Service, Naval Exchange Service Command, and Marine Corp Community Services to develop their program around the framework outlined in this report, including developing an implementation plan for the code of conduct that includes steps to communicate the elements of the code to internal staff, business partners, and factory workers and to train them on these elements.

Agency Affected: Department of Defense

Status: Closed - Implemented

Comments: In response to GAO's recommendation, DOD reissued DOD Instruction 4105.71 (Nonappropriated Fund Procurement Policies) dated July 30, 2002, requiring the military exchanges to develop a code of conduct that reflects the values and expectations the exchanges have of their suppliers.

Recommendation: As the Secretary of Defense moves to implement the congressionally directed program to assure that private label exchange merchandise is not produced by child or forced labor, the Under Secretary of Defense (Personnel and Readiness), in conjunction with the Assistant Secretary of Defense (Force Management Policy), should require the Army and Air Force Exchange Service, Naval Exchange Service Command, and Marine Corp Community Services to develop their program around the framework outlined in this report, including creating a code of conduct that reflects the values and expectations that the exchanges have of their suppliers.

Recommendation: As the Secretary of Defense moves to implement the congressionally directed program to assure that private label exchange merchandise is not produced by child or forced labor, the Under Secretary of Defense (Personnel and Readiness), in conjunction with the Assistant Secretary of Defense (Force Management Policy), should require the Army and Air Force Exchange Service, Naval Exchange Service Command, and Marine Corp Community Services to develop their program around the framework outlined in this report, including pursuing these efforts jointly where there are opportunities to minimize costs.